Intellectual property law is good. Excess in intellectual property law is not. This blog is about excess in Canadian and international copyright law, trademarks law and patent law. I practice IP law with Macera & Jarzyna, LLP in Ottawa, Canada. I've also been in government and academe. My views are purely personal and don't necessarily reflect those of my firm or any of its clients. Nothing on this blog should be taken as legal advice.

Saturday, November 21, 2009

Somalia has announced it plans to ratify a global treaty aimed at protecting children, leaving the United States as the only country outside the pact, UNICEF said on Friday.

Somalia and the United States have long been the last hold-outs to the Convention on the Rights of the Child, adopted by the United Nations General Assembly exactly 20 years ago.

The most widely ratified international human rights treaty, it declares that those under 18 years old must be protected from violence, exploitation, discrimination and neglect.

(emphasis added)

Maybe the only explanation for the US being the last holdout from this worthy sounding treaty that even Somalia will ratify is that it is just too busy protecting the obsolete business models of the RIAA and MPAA through the secret ACTA treaty process and doesn't have enough time or resources to worry about lesser priorities, such as protecting children.

Monday, November 16, 2009

Here's an economics paper by Francisco Alcalá (Universidad de Murcia) and Miguel González-Maestre (Universidad de Murcia) that is getting much attention and that concludes that longer copyright terms may actually be a disincentive to new production by emerging artists.

Here's the abstract:

AbstractPromoting high-quality artistic creation requires sorting the most talented people of eachgeneration and developing their skills. This paper takes a professional-career perspectivein analyzing the determinants of artistic creation. The paper builds an overlappinggenerationsmodel of artists with three features: (i) the number of highly talented artistsin a given period is positively linked to the number of young artists starting the career inthe previous period; (ii) artistic markets are superstar markets; iii) promotion expendituresplay an important role in determining market shares. In this framework, the paperanalyzes the consequences for high-quality artistic creation of changes in the length of thecopyright term, increases in market size, and progress in some communication technologies.It is shown that increasing superstars’ returns do not always increase the expectedreturn to starting an artistic career. As a result, in the long run, longer copyrights do notalways stimulate artistic creation.

For those who actually would like to see some logic rather than lobbying on the issue of copyright as an incentive to creativity, there's also a wonderful book published in 2003 by a brilliant elder statesman of industrial economics and the economics of technological change and IP named F.M. Scherer entitled Quarter Notes and Bank Notes: The Economics of Music Composition in the Eighteenth and Nineteenth Centuries about the rise of copyright in the how copyright protection may have actually discouraged production - and apparently did in the case of Verdi, which he looks at very closely. Not that Verdi was unproductive - he just slacked off a lot as he got quite rich due to the ever increasing power of copyright.

I leave it to her fans to decide if the artistic legacy of Britney Spears, another example of a superstar who benefits from copyright , is in decline or whether the incentive theory works for her... and if there's any correlation with her royalties.

Sunday, November 15, 2009

Here's a seriously scary ill-informed interviewon CTV Power Play ironically on Friday the 13th at about the 3:30 mark with with former Liberal & Tory Minister David Emerson and interviewer Tom Clark.

Somebody has misinformed Clark a lot about Canadian law - and fed him lots of property talk about "theft" and "stealing."

Tom Clark wonders why we can't bring in a law to "prevent theft" and why this is a "delicate" matter and who are the stakeholders?

Tom Clark states that "one example I was given" would be that if a container arrives in Halifax labelled "Counterfeit Louis Vuitton bags", it would be "perfectly legal" in Canada and that one can steal off the internet and sell to North Korea or words to that effect. Emerson says "That's right.."

I wonder who briefed Tom Clark.

Emerson, for his part, thinks that Canada is involved in negotiations with the US and "3 or 4" other countries to "create and IP agreement intended to be the most rigorous in the world".

Clark wonders "whether we should allow crime to continue to poke the eye of the Americans?

Emerson sounds somewhat more intelligent than Clark and even says some intelligent things about the purpose of copyright law but then was was a Minister of Industry, and Foreign Affairs and International Trade.

Sorry if I didn't transcribe with 100% accuracy. My stenographic skills are rusty.

If such a smart former Minister and such a high profile TV journalist can be so misinformed and get so much wrong in such a short interview on such a high profile subject, it's really scary - even by Friday the 13th standards.

Thursday, November 05, 2009

The following is my article in somewhat more convenient form on the above subject from the Hill Times Policy Briefing on Copyright published on November 2, 2009 and available from the Hill Times website here.

**********

OTTAWA - This is the 20th anniversary year both of the Hill Times and also its neighbour across the Sparks Street Mall, Canada's Copyright Board. "The Board" is a specialized quasi-judicial tribunal located at the iconic address of 56 Sparks Street in Ottawa, one floor up from the fabled USC Canada, which was founded by Dr. Lotta Hitschmanova in 1945 as the Unitarian Service Committee of Canada.

The USC and the Copyright Board are both, ironically, involved in the redistribution of Canadians' money. However, unlike the volunteer contributions to the USC, Copyright Board tariffs have the force of law and are often referred to as "taxes". Many of these tariffs are deeply hidden but lucrative such as those on broadcasters or businesses that utilize "background music". Others are far more visible, such as the recent surprisingly costly tariff of $5.16 on every full time student in Canada's K-12 educational system outside of Quebec, which also entails a whopping additional retroactive liability of about $40 million, $16 million of which arises in Ontario. Questions will be asked about how such an expensive tariff arose and why so much money is being paid for windfall photocopying royalties and not on more productive and innovative purposes such teachers, books and computers. As is often the case, there is no such tariff in the USA.

Canadian government policy has deliberately encouraged and even subsidized this collective system on the assumption that these tariffs will actually help actual creators. If so, these tariffs would take the heat off the beleaguered subsidy system for Canadian culture. But copyright tariffs work best for those who are already commercially successful and the collectives' lawyers, consultants and managers. Much if not most tariff money leaves the country as a result of international treaty obligations. Subsidies, however, can be narrowly targeted and kept in Canada.

Canada has about 36 active collectives with annual revenues approaching $500,000,000. Contrast this with only about a half dozen counterpart collectives in the USA. Canada's Copyright Board, which has a staff of 13 plus up to five full time members, is by far the largest such organization anywhere.

There are many good things about the Canadian collective system, which has grown exponentially in the last 20 years from the previous part-time regime that existed for about five decades. This growth has, however, created some issues that need to be addressed. Here are some examples.

•The costs of Copyright Board hearings have become absurdly and unnecessarily high. This actually benefits collectives, because it drives many potential objectors away. Besides, these sole purpose collectives recover their costs from the tariff payments, which means from ordinary Canadian businesses, consumers and taxpayers who invariably have many other things to worry about besides copyright. There should be serious consideration of a cost recovery mechanism, as is found at the CRTC.

•Although there are usually only a handful or so of actual hearings each year at the Board, these usually take several years to reach fruition and the delay in issuing the decision can be 18 months or more. This pace contributes to the enormous expense of the hearings and to the very real problem of significant, lengthy and costly retroactivity, such as recently seen in the educational and background music sectors. The Board's jurisdiction to award such retroactive tariffs may be vulnerable to challenge. The "mother" of all Board hearings, SOCAN's internet Tariff 22 for music on the internet, is still unresolved after 15 years with the end nowhere near in sight.

•The lack of transparency of the collective system needs to be addressed through mandatory public filings of data disclosing such information as costs of administration, aggregate salaries, legal and consulting fees, etc. and how much is left over for actual creators. Canadians and collective members themselves also need to know the mean and average distribution per member within each collective, since that is a key indicator of the efficacy of the system. For example, the Canadian Private Copyright Collective has spent over $25 million on lawyers, consultants, experts, administration, public relations, travel etc. over the last ten years. But the average distribution to actual beneficiaries of the blank media levy is only about $160 annually and probably far less in most cases involving the actual musicians who do appear on the collective's radar. And many musicians don't. The Government needs to be able to evaluate the collective system though verifiable data and not just anecdotal "feel good" info provided by lobbyists.

•The Board needs to revisit basic legal principles of evidence. It puts far too much reliance on opinion evidence presented by supposed experts, although it usually does not formally "qualify" these experts as such. Some of these witnesses who appear regularly before the Board have close economic ties if not outright dependency on the party calling them, and may be effectively playing a management and/or advocacy role for the collective. The Board has shown great reluctance to permit any questions relating to the independence of these "experts" or going to the weight of their testimony.

•The Board should not be expected to take upon itself the job of filling what its Chairman William Vancise calls "gaps" in the legislation. Arguably, the Government has left far more to the Board than was prudent on issues such as retransmission and the blank media levy in order to avoid making tough decisions that have been taken in other countries for better or worse. The result was a far more expensive retransmission regime than was envisaged with costs passed onto Canadian cable subscribers. The basically blank regime for the blank media levy has led to an extraordinary situation in which the Federal Court of Appeal ("FCA"), which reviews the Board, has twice had to tell the Board that the legislation does not allow for a levy on digital audio recorders. This has prompted some very unusual and unusually explicit public criticism of the Court by Chairman Vancise, who described the Court's most recent ruling by Justice Karen Sharlow as "six turgid paragraphs." He describes the previous ruling by Justice Marc Noël as "obiter" and a "throw away line that has had extreme consequences, not the least of which is at least 10's of millions of dollars in royalties that have not been paid to authors, composers and performers and threatens to destroy the private copy regime." (Full disclosure - I argued successfully against the Board's view in both of these instances at the FCA).

Collective administration is essential for copyright, but it does not follow that more and more inefficient collectives and more protracted and expensive hearings are better for public policy. It was a prescient Judge James Parker who effectively created the predecessor to the current Copyright Board with his landmark 1935 report. It is time once again for a judicially led commission to solve some of the difficult problems now facing Canadian collectives and the Copyright Board that others, including the Board itself, seem unable or unwilling to confront. Otherwise, Canada's current collective system will largely benefit only a handful of lawyers, consultants and managers of collectives and fail in its purpose of rewarding actual creators and protecting the public interest.

Howard P. Knopf

Counsel

Macera & Jarzyna, LLP

Ottawa, Canada

Note: The above is based upon the author's paper for the Law Society of Upper Canada in 2008. It reflects solely his own views, and not necessarily those of any of his clients.

David Gonczol, Ottawa Citizen

If all or indeed any substantial portion of the rumours about ACTA (three strikes +, DMCA +, WIPO+, border searches of iPods, cell phone etc, for MP3s, etc.) are true, and if Canada goes along with this "agreement", then Canada will forfeit its sovereignly to determine its own IP policy. For starters, this summer's mammoth copyright consulation will have been for nothing.

So if there is substantial truth to these rumours, then Canada needs to seriously consider walking away from this secret treaty/agreement process. Maybe sooner rather than later.

We know that there is unprecedented secrecy over this process. Neither the WTO nor WIPO ever worked this way. There is no reason or justification for this. Absolutely none other than industry induced secrecy. You can be sure that the RIAA and MPAA know exactly what is going on here.

We know that Canada has very limited ability to influence the Americans. As Trudeau said, when a mouse gets in bed with an elephant, it is the mouse that needs to worry about being rolled over.

Canada has long since lost much if not most of its honest broker status in international IP and other diplomatic circles. We likely don't have the clout any more to stand up to the Americans in a negotiating room or to broker some more moderate IP arrangement. If we really think we can do that, maybe we should remain at the ACTA table for a while. But if we can't, maybe we should just walk away. And maybe sooner rather than later.

Walking away could preserve Canadian sovereignty to do what is best for Canada, which is what we really ought to care about. It might help Canada to regain international credibility and bargaining strength.

From what we have seen in the leaks to date, there is really nothing in the proposed ACTA that would benefit Canada. We do not have a serious piracy or counterfeiting problem here unless one believes the recycled and circular back-of-the-envelope “evidence” from the usual lobbyists. One has to look very hard to find fake Rolexes or pirate CDs or DVDs in Canada. I have frankly never seen this stuff in Canada. Compare mid-town Manhattan where these things are “in your face.” Claims about counterfeit medicines and health and safety issues, etc. are a smokescreen for the real agenda here, which is an ultra strong copyright and trade-marks regime, with huge “ex officio” powers given to border guards, who will be informed and educated by industry “experts.” Such ex officio action has recently resulted, for example,. in scandalous delays of perfectly legal generic AIDS drugs en route through The Netherlands to developing countries. In any case, one does not need ACTA to deal with any issues involving fake medicines or counterfeit Christmas tree decorations.

People don’t like surprise attacks on their civil liberties - and ACTA could be a very big surprise indeed, resulting in cut-offs of internet service and warrantless searches of electronic devices at the border for copyright infringement - i.e. downloaded songs and movies.

Anyone who doesn't believe that the US is serious about this should look at a recent bulletin dated August 20, 2009 from U.S. CUSTOMS AND BORDER PROTECTION CBP DIRECTIVE NO. 3340-049 which begins as follows:

PURPOSE. To provide guidance and standard operating procedures for searching, reviewing, retaining, and sharing information contained in computers, disks, drives, tapes, mobile phones and other communication devices, cameras, music and other media players, and any other electronic or digital devices, encountered by U.S. Customs and Border Protection (CBP) at the border, both inbound and outbound, to ensure compliance with customs, immigration, and other laws that CBP is authorized to enforce.

These searches are part of CBP's long-standing practice and are essential to enforcing the law at the U.S. border. Searches of electronic devices help detect evidence relating to terrorism and other national security matters, human and bulk cash smuggling, contraband, and child pornography. They can also reveal information about financial and commercial crimes, such as those relating to copyright, trademark and export control violations. Finally, searches at the border are often integral to a determination of admissibility under the immigration laws

(emphasis added)

And this is BEFORE ACTA. This US will expect this and more from other ACTA partners.

That's right. Copyright “violations” (whatever that may mean) are right up there with terrorism and child pornography. Take no comfort in promises of a “de minimis” exception policy. First of all, I'm sure that RIAA and MPAA and their Canadian branches, CRIA and CMPDA, will lobby hard to make sure that “de minimis” means some truly low number such as five or ten MP3 files or one or two movies for which the traveller can't prove “ownership” on the spot. And do we really want border guards detaining us for hours and our devices for up to days, weeks or months while they determine whether we are “de minimis” or not? And what about songs that we have legally ripped to our iPods, according to the RIAA and CRIA. from CDs that we have bought and paid for? What if the customs agent doesn't believe that we own the CDs? And don't bring any children with you on your travels. (Unless you want to leave them in the care of border officials!)

They are notorious “pirates.”

If Canada remains in this negotiation in order to try to moderate the extremists, the minimum price for so doing should be complete transparency and immediate publication of all draft texts, as has been the normal practice at the GATT, WTO, WIPO and elsewhere for decades. That is the only way that moderation can hope to be achieved. And we should still be prepared to walk away.

Tuesday, November 03, 2009

The Chairman of the Copyright Board, Justice William Vancise, gave what has become his traditional annual speech to the Intellectual Property Instate of Canada's summer course on copyright held at McGill University on August 11, 2009. It has now been made available online here.

He had some interesting things to say about what he believes should be addressed in the next copyright bill:

First, we have to recognize that sometimes a strange brew of copyright, ubiquitous technology and traffic control creates real privacy issues. Copyright should not be the means by which control is exercised in the private sphere. Copyright should therefore continue to focus on professionals and on the public sphere.

Second, we will have to recognize market failures where they exist. Where they do, tough choices will have to be made. In some cases, the law will have to allow uses for free and copyright owners will have to live with it. In others, it will be possible to monetize copyright uses either voluntarily or through compulsory regimes. To do so, it may become necessary to impose liability on some participants in the chain of copyright consumption who currently enjoy immunity: just as it was possible to make the case that blank CD manufacturers should pay a levy for the copies of music made by those who use their CDs, it should be possible to make the case that Internet service providers should pay a levy for their clients’ use of copyrighted works.

Third, parliament will have to be consistent in the choices it makes. It may be politically expedient to monetize the use of music on the Internet but not to monetize the use of movies. To do one without the other makes no sense. It also makes no sense to impose a private copying levy on blank CDs but not on iPods: either you impose a levy on both, or you remove it from both. The removal of both would potentially mean the end of the private copying regime. It seems to me that only if parliament shows such consistency, will it be able to convince consumers and others that the law makes some sense.

He also had frankly unusual and unusually frank comments about the Supreme Court of Canada and Federal Court of Appeal. On the former, he says:

The Supreme Court is “doing” more copyright law than Parliament. One may ask: is this the Court’s domain? Fair minded persons may disagree on this. Professor Daniel Gervais, for one, argues that in effect, things are moving so fast in the copyright world that absent parliamentary action, the court feels it necessary to fill in the gaps. I might add, this is not unusual. Courts frequently move to fill vacuums when the legislators fail to act. Two notable examples are gay rights under Human Rights legislation and abortion in the field of criminal law.

On the Federal Court of Appeal, which reviews the Copyright Board, he says:

The Supreme Court is not the only court attempting to fill perceived gaps in the Copyright Act. The Federal Court of Appeal has attempted on at least two occasions to reconcile the wording of the Act with the contemporary reality (means of consuming protected works or objects of copyright).

In 2004, the Court ruled the Board was wrong to conclude that the permanently embedded or non-removable memory, incorporated into a digital audio recorder or the device itself, was “an audio recording medium ordinarily used by individuals to copy music”.

In 2007, CPCC tried again and the Board was asked to determine whether the recorder itself was a recording medium as defined in the Act. It said yes in a long and well reasoned decision. The Federal Court of Appeal, once again on judicial review, overturned the Board. This time, the Court in six turgid paragraphs found its decision of 2004 dealt with the matter and was binding on the Board. I still wonder how the Federal Court of Appeal came to that conclusion when the question of whether the device itself was subject to a levy had not even been an issue in the previous decision and the comments of Noel J.A. were obiter and contained in what can only be called a “throw away line.” A throw away line that has had extreme consequences, not the least of which is at least 10's of millions of dollars in royalties that have not been paid to authors, composers and performers and threatens to destroy the private copy regime.

(Full disclosure - I argued successfully against the Board’s view in both of these instances at the FCA).

I highly recommend reading the entire paper. Chairman Vancise also provides very brief summations of what he sees as the essential holdings of several recent Copyright Board decisions. It is unusual for a Canadian judge or tribunal Chair to be this explicit in stating his or her views on specific cases and policy issues. The Copyright Board, which he chairs, has great oversight power over almost half a billion dollars per annum worth of copyright tariff payments in Canada. Therefore, his views require attention from everyone interested in copyright law in Canada.

A hearing will take place tomorrow at 2:00 PM to confirm the appointment of Victoria Espinel, nominated to nobody's surprise by President Obama to be his IP "Czar". This is a position created by the Bush administration under intense content industry pressure. Her job is to deal with "enforcement."

The question is not whether she is qualified. She is and will almost certainly be confirmed. The question is what she will be able to do, with all of those folks out there from USTR, Commerce, the Copyright Office, DOJ, etc. with huge resources and turf with very deep roots. Not to mention Congress, where the real power lies and most of the action really takes place on IP.

BTW, those who think that Canada is alone or unfortunate in having more than one source of power in government IP policy making should look carefully at how the US system works (or sometimes doesn't work).

And even though she may be nearer to the President than others in terms of proximity, she will not have much in the way of resources and he has a few other more pressing things on his mind than incessant whining by the usual sources about piracy and counterfeiting everywhere in the world it seems other than in mid-town Manhattan.

This hearing will be webcast and may be worth watching to see if she talks about what her job will entail.

Canada is off once again to Vienna to chair the UNCITRAL initiative on security interests. The Canadian delegation is now in Vienna from November 2 to November 6, 2009.

Canada has provided the Chairperson for UNCITRAL'S Working Group VI, which deals with Security Interests since its first session in New York in 2002. She is Kathryn Sabo of the federal Department of Justice. This is the 16th session of Working Group VI. All of the meetings have taken place in New York and Vienna.

Working Group VI has come up with a basic “Guide” document dealing with security interests generally. The main document is here. Don't be in a rush to hit “print”. It's over 500 pages long.

The supplementary material, currently under consideration, and which seems to deal mainly with IP, is inconveniently split up into small chunks, is here.

Even though these latest draft papers date from July of 2009, the consultation by telephone took place only last week on October 29, 2009.

IPIC (Intellectual Property Institute of Canada) took part in the consultation and has prepared some good written commentary. It has an active and well informed committee. It provided suggestions on acquisition financing, continuous filing, the “ordinary course” rule, and choice of law relating to royalties. IPIC also provided detailed comments back in April. Without the prodding of IPIC and perhaps my occasional blogs, I doubt that there would have been any consultation.

The problem for most readers of this blog, and even its author, is that these several hundred pages of documents are written in very inscrutable international bureaucratese about very technical stuff at the edge of IP, bankruptcy, insolvency, licensing, and banking/lending law. Even if one has the time to read all of the documents, this is very tough going. There are probably only about a couple of dozen people in Canada who can make much sense out of them, and probably less than a handful of people who have serious expertise in all of the necessary areas.

We struggled with all of this almost a decade ago when the late lamented Law Commission of Canada looked at the issue - and we did come up with a perfectly readable book that I edited, still availablehere.

But the current landscape is quite unreadable. Given the undoubtedly large investment made by Canada in the time and travel costs of providing a Chairperson and three experts to advise her for this UNCITRAL Working Group VI efforts over the several years, I would have thought that Canadians could be provided with a few pages of explanatory documents about what is going on and how it may affect them.

I've been told that the UNCITRAL soft law initiative is consistent with Canadian law. That is not without irony because Canadian law is not exactly very clear on lots of fundamental questions, as anyone who reads my book will quickly see. Little has changed since that book was published in 2002. The UNCITRAL efforts will presumably provide a framework for other countries thinking of legislating in this area. This will supposedly benefit Canadians seeking to do business in such countries. If this is so, is it too much to ask that our government inform Canadians what this is all about in language that Canadian lawyers, bankers and other stakeholders can understand?

These issues are potentially very important for those in sectors such as film, sound recordings, software, and high tech generally where financing deals can readily involve IP as collateral, if there is sufficient expertise to do such deals. Indeed, most of the discussion at last week's “consultation” concerned acquisition financing, presumably a hot topic in these sectors. There was considerable confusion about what version of the latest document from UNCITRAL will be “official” on this issue.

Unfortunately. the Department of Justice, which is leading Canada's participation, has no interest in providing any explanation of the UNCITRAL documents to Canadians and the consultation effort has been invariably been passive, infrequent (only two or three occasions of which I am aware) and on the eve of any of the meetings in New York or Vienna, Consultation requires more than providing a link to UNCITRAL's website.

One would hope that Canada's expert team could provide a brief of a few pages outlining what this Guide and its IP Supplement will do, Canada's role in this process, and why Canadians should be interested. Above all, we need to know the main features of the proposed soft law regime. Surely with all of the expertise our delegation has, and the fact that we Canada has invested hundreds of thousands of dollars or more in providing the chair and other support for this effort, the provision of an explanatory document is not too much to ask. It might even foster investment and innovation.

We take the UDRP now for granted because it was and is a simple, elegant and efficient method of dealing with a very pressing problem, namely the registration and use in bad faith of domain names that are identical to or confusing with a trademark or service mark in which the complainant has rights and where the registrant has no rights or legitimate interests in respect of the domain name. But it was not an obvious solution at the time and WIPO deserves much credit.

WIPO under Francis Gurry and Erik Wilbers came up with and implemented a solution that worked - and all without a treaty. This was critical to establishment of ICANN and ICANN's initial credibility. Indeed, ICANN did not yet exist when WIPO started its UDRP consultation process in 1998. The WIPO Arbitration and Mediation Center has now processed more than 16,000 decisions to date - a truly remarkable record. They have very tight schedules and deliver speedy, fair, efficient and inexpensive justice. I'm pleased to have been involved in some of these cases as a panelist.

A very recent positive development approved by ICANN on October 30, 2009 concerns the WIPO "eUDRP" process, will will do away with paper filings - except for the original service of the complaint notiice, which will be done in paper to a physical address as a safety valve to ensure proper service.

Also in the works is a "Fast Track" procedure that will provide a more summary determination in obvious cases, while still preserving full recourse to a full three person panel determination. This will account for the fact that about 25% of cases are settled and 75% of the rest proceed by way of default.